Big news is rolling in that could shake up the world of holiday rentals. Let’s dive into the recent policy changes and what they mean for holiday let owners.
Spring budget bombshell
Jeremy Hunt dropped a major announcement in the Spring Budget, abolishing the Furnished Holiday Letting (FHL) Regime. Along with this, changes to Capital Gains Tax and the removal of Stamp Duty relief for holiday lets are set to reshape the landscape. These changes could significantly impact how profitable holiday lets remain.
Election buzz
With a general election slated for July 4th, there's a lot of uncertainty in the air. Consultations on these changes are on hold, meaning more waiting and speculating for property owners. Forecasters are hinting at a post-election Autumn Budget, so we might see more concrete details later this year.
Regional twists
Adding to the mix, Wales announced a new licensing scheme in January, and there are proposed planning reforms for Airbnb lets. If you’re an investor, keeping up with these changes is key to staying ahead.
The nitty-gritty of policy changes
End of the FHL regime: This has been a lifeline for many, offering tax advantages like mortgage interest deductions and lower capital gains tax rates.
Capital Gains Tax: The rate for holiday lets will drop from 28% to 24%, which might sound good but comes with other financial shifts.
Stamp Duty: The removal of multiple dwellings relief will make acquiring new properties more expensive.
Local measures
Across the UK, regional measures are being introduced:
Scotland: Double council tax for second homes.
Wales: Increased days for holiday lets to qualify for business rates.
Consultation: On planning permission for short-term lets, aiming to balance tourism with local housing needs.
Why these changes?
Holiday lets surged by 40% between 2018 and 2021, thanks to platforms like Airbnb. This boom benefited local economies but also caused issues like rising rents and locals being priced out. The government’s goal is to prevent communities from being hollowed out and address antisocial behavior from holidaymakers.
Election impact
The upcoming election could delay or change these policies. If the Conservatives win, expect these changes to proceed. A Labour victory could mean even stricter regulations on holiday lets. Either way, property owners should prepare for significant adjustments.
Financial implications
These changes will hit holiday let owners’ pockets hard:
Tax Increases: Higher taxable incomes and larger tax bills.
Capital Gains Tax: Higher CGT rates on sales will make selling less attractive.
Stamp Duty: Without relief, buying new holiday lets will be pricier.
Housing market impact
The shift could lead to more properties converting to long-term rentals, potentially easing rental shortages in some areas. However, it could also mean more properties on the market as owners rush to sell before the new rules kick in, causing short-term volatility.
Silver linings?
These changes might revitalise areas suffering from seasonal population drops, helping local businesses thrive year-round. A stable population could boost local economies and community spirit.
Adapting to change
Property professionals need to stay on top of these changes:
Diversify: Mix short-term and long-term rentals.
Enhance management: Professional property management can boost income.
Refinance: Explore new financial strategies.
Stay Informed: Keep up with local regulations.
Conclusion
The holiday let market is entering a period of change. With tax breaks ending, CGT adjustments, and the removal of Stamp Duty relief, the financial landscape is shifting. But with challenges come opportunities. By diversifying strategies and staying informed, holiday let owners can navigate this evolving market and continue to thrive.
How will these changes affect Falmouth
Big changes are coming that could seriously impact Falmouth rentals. With the government axing tax breaks and hiking capital gains tax, owning a holiday let here might become less viable. This might lead to fewer holiday rentals and higher prices for holiday makers.
These changes could push property owners to convert their properties to long-term rentals. While this might help locals find housing, it risks damaging Falmouth's vibrant tourism scene and hurting local businesses that rely on tourist spending. Let’s hope for a balanced approach that supports both the local community and the investors.
If you want to see how Guested can help you secure your Holiday Let in Falmouth, Cornwall, please get in touch below.